A Careful Asset Allocation Strategy Can Help You Create WealthIf the ruling dispensation manages to make a comeback as per the general consensus, the market is expected to rally, however, if there is a negative surprise in store the markets can witness sharp corrections at-least in the short term

Though managing a complex portfolio can be challenging for common investors, it's not tough if financial planning is done in a systematic way. A common mistake on the part of most investors is to follow recent trends in the performance of a particular asset class and invest in it, or focus too much on specific short-term things like 'which stock to pick' or 'when to buy/sell' and end up with a portfolio which does not satisfy important financial needs. They often forget the long-term goal that can be achieved by proper asset allocation that helps to build well-diversified investment portfolios aiming to deliver higher risk- and inflation-adjusted returns. A proper asset allocation is more of a refined and systematic method of investment practice. Rules which can be easily followed and implemented are the ones to be put in place. Any skewed asset allocation will create issues of liquidity and investment performance.

The first and basic requirement for wealth creation is to have adequate savings after meeting all monthly obligations and after setting aside enough money for exigencies. Therefore, before starting an investment plan, it's critical to manage your monthly finances: create an emergency fund (to cover living expenses for a few months in case of an emergency like job layoff) and have sufficient coverage in the form of, life, health and general insurance. Once the emergency funds and insurance are taken care of then only one can start thinking of investments and portfolio creation. Following steps should be taken to have a robust asset allocation and a portfolio that matches one's risk-reward expectations.

Set Your Financial Goal and Assess Your Risk:

The first step in the portfolio management process involves understanding and articulate investment goals and constraints as accurately as possible. The best practice for good financial planning is to think about your short-term, medium-term and long-term financial needs so that you can construct a clear policy for your investments that ensures the constructed portfolio will suit your needs. Financial goals should be set as per your investment constraints such as liquidity needs, time-bound returns, tax concerns, personal preferences and unique needs arising from personal situations.

It is not only the well-defined goal that can create wealth for you, it's important that your investment goal should be aligned with your risk profile. Well defined Investment goals are usually expressed in terms of risks that the investor is willing to take and returns that the investor expects. The goal should be specific, measurable, achievable, realistic and time-bound.

Construct Your Portfolio:

portfolio construction should be implemented by following the investment strategy that is derived from your goal and risk appetite. An optimal portfolio is well diversified and spread across multiple asset classes, the proportion of the asset class mix is dependent on the amount of risk one is willing to take. Examples of asset classes include, equity, debt, fixed deposits, real estate and precious metals. Ideally, the main objective of portfolio construction should be to gain maximum returns with minimum to moderate risk. At times when equity and debt markets are volatile, investors will have to look at proper asset allocation based on their long-term goals and should avoid taking positions based on any market-related anticipation.

At present, Indian equity markets are going through a phase of extreme volatility due to uncertainties surrounding the outcome of the General Elections. If the ruling dispensation manages to make a comeback as per the general consensus, the market is expected to rally, however, if there is a negative surprise in store the markets can witness sharp corrections at-least in the short term. In this environment of heightened volatility, it is advisable to be equity light especially in the first half of the year and to have higher allocation to debt and fixed income securities. A low risk asset allocation strategy is shown in the following table.

Low Risk Investment (60per cent)	Risk Investments Equity (40per cent)
Short-term Debt Securities (20per cent) Mid to Long-term Debt Securities (10per cent) Safe Deposits such as: FD and PPF (20per cent) Gold (10per cent)	Large Cap Stocks / Funds (20per cent) 多样化的基金(15%) Small and Mid-cap Stocks / Funds (5per cent)

Equity:

Investment in equities has the potential to grow one's wealth multifold in long-term, but it also comes with a high risk associated with it. To maximize portfolio returns, equity investments are necessary however for 2019 risk averse investors will be well served to have low exposure to equities at-least till the first half of the year.

债务工具:

Investors should have a significant portion of their portfolio allocated to debt instruments that will provide a cushion against equity investment volatility. One can directly invest in debt instruments through Govt. bonds, corporate bonds, short term money market instruments, or through debt mutual funds. It is advisable to invest in top rated debt instrument and allocate into both short-term and long-term debt.

Safe Deposits such as FDs and Public Provident Fund (PPF):

PPF is considered as the safest and secure long-term investment product when compared to other investment options in India. Currently the rate of interest on PPF account is 8 percent for Apr – Jun 2019 (Q1 FY20) and interest rates are now set on a quarterly basis (every three months). Investors with lump sum saving amount and low risk tolerance can invest in fixed deposits (FDs) as these are secure investment instruments that offer higher interest rates than deposits in savings accounts.

Gold:

Gold is one of the oldest investment asset class and is also considered as a safe haven against uncertainties and market turmoil. Gold Investments is also necessary to provide sufficient diversification to an investment portfolio, investment in gold can either be done by buying physical gold or through gold mutual funds, gold deposit schemes or through gold ETF's.

Review Your Portfolio Periodically:

Even the simplest asset allocation strategies need rebalancing on occasions and a good rule of thumb is to review and rebalance your portfolio at least once a year to help keep you on track.

总之,智能分配每一个投资组合risk's appetite is essential for long-term wealth generation; some financial risk needs to be taken to maximize portfolio returns. A diversified portfolio with an adequate proportion of various asset classes is the starting point, investors are also required to review, analyze and update their portfolio allocations on a regular basis.